Study: Obama's health care law would raise deficit

By RICARDO ALONSO-ZALDIVAR | April 9, 2012 | 11:38 PM EDT

WASHINGTON (AP) — Reigniting a debate about the bottom line for President Barack Obama's health care law, a leading conservative economist estimates in a study to be released Tuesday that the overhaul will add at least $340 billion to the deficit, not reduce it.

Charles Blahous, who serves as public trustee overseeing Medicare and Social Security finances, also suggested that federal accounting practices have obscured the true fiscal impact of the controversial legislation, the fate of which is now in the hands of the Supreme Court.

Officially, the health care law is still projected to help reduce government red ink. The Congressional Budget Office, the government's non-partisan fiscal umpire, said in an estimate last year that repealing the law actually would increase deficits by $210 billion from 2012-2021.

The CBO, however, has not updated that projection. If $210 billion sounds like a big cushion, it's not. The government has recently been running annual deficits in the $1 trillion range.

The White house dismissed the study in a statement late Monday. Presidential assistant Jeanne Lambrew called the study "new math (that) fits the old pattern of mischaracterizations" about the health care law.

Blahous, in his 52-page analysis released by George Mason University's Mercatus Center, said, "Taken as a whole, the enactment of the (health care law) has substantially worsened a dire federal fiscal outlook.

"The (law) both increases a federal commitment to health care spending that was already unsustainable under prior law and would exacerbate projected federal deficits relative to prior law," Blahous said.

The law expands health insurance coverage to more than 30 million people now uninsured, paying for it with a mix of Medicare cuts and new taxes and fees.

Blahous cited a number of factors for his conclusion:

— The health care's law deficit cushion has been reduced by more than $80 billion because of the administration's decision not to move forward with a new long-term care insurance program that was part of the legislation. The Community Living Assistance Services and Supports program raised money in the short turn, but would have turned into a fiscal drain over the years.

— The cost of health insurance subsidies for millions of low-income and middle-class uninsured people could turn out to be higher than forecast, particularly if employers scale back their own coverage.

— Various cost control measures, including a tax on high-end insurance plans that doesn't kick in until 2018, could deliver less than expected.

The decision to use Medicare cuts to finance the expansion of coverage for the uninsured will only make matters worse, Blahous said. The money from the Medicare savings will have been spent, and lawmakers will have to find additional cuts or revenues to forestall that program's insolvency.

Under federal accounting rules, the Medicare cuts are also credited as savings to that program's trust fund. But the CBO and Medicare's own economic estimators already said the government can't spend the same money twice.

Blahous served in the George W. Bush White House from 2001-2009, rising to deputy director of the National Economic Council. He currently is a senior research fellow at the Mercatus Center.